Homebuilding Poised for Growth in 2021 but Challenges Persist
Washington, DC, February 10, 2021-As the country continues to rebound from the impact of the COVID-19 pandemic, housing has been a bright spot in the economic recovery. And while the homebuilding industry is poised for another solid year in 2021, regulatory and supply-side challenges could harm housing affordability, slowing momentum and limiting growth, according to economists speaking at an online press conference in conjunction with IBSx, the 2021 virtual International Builders’ Show.
“Housing affordability will continue to be a top concern this year,” said NAHB chief economist Robert Dietz. “On the demand side of the housing market, limited inventories of single-family homes generated strong price gains in 2020. While supply-side pressures-such as resurgent lumber prices, a shortage of buildable lots, inconsistent access to building materials and a regional skilled labor deficit-foreshadow higher costs and longer build times this year. A changing regulatory landscape threatens to further erode housing affordability and make the tight inventory environment worse.”
Housing is one of the few sectors experiencing year-over-year job gains, as the industry has hired more workers in the wake of the pandemic, but it still has not been enough to meet the increasing demand for housing. Historically low interest rates are one factor driving this demand, but a geographic shift in where people are choosing to live is also affecting the housing industry, as lower-density areas become more popular.
As the nation ramps up deployment of COVID-19 vaccines this year, this will be good news for the overall economy and strengthen housing demand but also place upward pressure on interest rates, which will price additional households out of the 2021 market.
As for the biggest short-term challenge facing builders, Dietz said “it is undoubtedly lumber prices. Pricing is now near the peak of mid-September and easily adding at least $16,000 to the cost of building a typical new single-family home.”